Thursday, August 20, 2009

Swiss Sell UBS AG Stocks, Tax Settlement Already Rewarding

As a result of the yesterday’s announcement that the names of over 4,500 Americans using bank accounts to avoid taxes would get turned over to the US government, Switzerland decided to let go of their UBS AG investments this morning. The sale earned the Swiss government an estimated $1.2 billion Francs – or about $1.1 billion in US currency.

The Swiss state sold 332.2 million shares to institutional investors at 16.50 francs each, the government said in a statement today. Including a 1.8 billion-franc cash payment the state is getting from UBS, the proceeds amount to about 7.2 billion francs.

The government bought 6 billion francs of UBS mandatory convertible notes last year to help the Zurich-based bank split off toxic assets amid the worst economic crisis since the Great Depression. The settlement of a U.S. lawsuit that sought data on 52,000 UBS clients and a 3.8 billion-franc capital increase in June strengthened confidence in the bank, the government said.

“The exit is a positive signal, as it shows the confidence of the Swiss government regarding the situation of UBS,” Stefan Schuermann, an analyst at Vontobel with a “hold” rating on the stock, said in a note. “The placement increases UBS’s flexibility in rebuilding its franchise and will help to keep or hire key employees.”

UBS rose 76 centimes, or 4.5 percent, to 17.50 francs in Swiss trading. UBS shares have risen 17 percent since the U.S. and Switzerland said they had reached an agreement in principle on the tax lawsuit on July 31.

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